Risk & Compliance

Corzine Fined $5M Over MF Global Collapse

In a settlement of a CFTC lawsuit, the former New Jersey governor also agreed to a lifetime ban from the futures industry.
Matthew HellerJanuary 6, 2017
Corzine Fined $5M Over MF Global Collapse

Ending a five-year legal saga, former New Jersey Gov. John Corzine has agreed to pay $5 million to settle a lawsuit over the collapse of his commodity brokerage, MF Global Holdings.

The settlement with the U.S. Commodity Futures Trading Commission was approved by a federal judge on Thursday. It also bars Corzine from ever working in the futures industry again and accepting any insurance coverage for the fine.

As Reuters reports, the agreement “resolves the last piece of litigation against Corzine over MF Global’s rapid descent into bankruptcy on Oct. 31, 2011, as an estimated $1.6 billion of customer money went missing.”

Corzine, 70, said he had accepted responsibility for MF Global’s failure. “I deeply regret the impact it had on customers, employees, shareholders and others,” he added.

After joining MF Global as CEO in March 2010, Corzine took a $6.3 billion position in European sovereign debt, betting the European Union would come to the rescue of Europe’s troubled economies, averting a default. But the bet went sour and two ratings agencies downgraded MF Global to junk, sending it spiraling into bankruptcy proceedings.

According to the CFTC’s suit, MF Global improperly used nearly $1 billion of customer funds to shore up liquidity during the last week of October 2011, rather than keep the funds separate, as margin calls, credit rating downgrades, and Corzine’s wager on the European sovereign debt left customers and investors increasingly worried about the firm’s survival.

The CFTC said Corzine failed to properly supervise employees handling customer funds, while Edith O’Brien, MF Global’s former assistant treasurer, authorized the illegal transfer of customer funds to MF Global accounts.

In a related settlement, O’Brien agreed to pay a $500,000 civil fine and accept an 18-month industry ban.

Corzine and other former MF Global officials previously agreed to pay $64.5 million to investors who sued them in a securities class action and $132 million to a trustee liquidating the company on behalf of creditors.

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